As cryptocurrency continues to grow in popularity, you might be wondering whether your campaign could benefit from cryptocurrency donations. Maybe you’ve heard of other politicians starting to accept Bitcoin or Ethereum in their own campaigns, and you’re curious about what kind of cryptocurrency regulations exist for political campaigns.
The truth is that receiving contributions in crypto depends on the office you’re running for. Cryptocurrency donations are allowed for federal elections. Here’s a short breakdown of the current federal digital currency regulation practices:
- Candidates must report the market value of the digital coin upon receipt.
- Candidates must disclose crypto-financial information as in-kind contributions (which requires including the cash value and contributor name).
- Candidates may liquidate the currency at any time but must adhere to source disclosures and contribution limits applied to other contribution types.
For many non-federal offices, however, you’ll need to look into cryptocurrency laws by state to find out whether you can accept crypto donations. At the state and local levels, cryptocurrency laws are still being defined, with the debate on how to regulate crypto contributions taking center stage.
In other words, when you’re asking whether your campaign can accept crypto donations, the answer is that it depends!
To better clarify which applies to your campaign and look at this issue more in-depth, this article covers the legal concerns and possible solutions to regulating cryptocurrency contributions. We’ll also highlight four states that allow crypto donations to political campaigns, four states that don’t, and four that should decide very soon.
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Legal Concerns About Cryptocurrency Regulation
Cryptocurrency is rather new to the political scene even though political campaign contributions have long been regulated. For instance, the Political Reform Act of 1974 sought to reduce corruption and increase disclosures and transparencies within political campaigns.
As part of that law, campaigns are required to produce detailed financial disclosures at regular intervals. The very nature of cryptocurrency, however, makes some of that record keeping more difficult. For example, the value of individual cryptocurrency fluctuates, which makes adhering to contribution limits trickier as well.
Several potential solutions could help address cryptocurrency regulation concerns. Campaigns wishing to receive cryptocurrency donations could accurately disclose the finances in a number of ways:
- States could require campaigns to convert crypto contributions into U.S. dollars to be stored in the established political campaign committee bank account. Services even currently exist that could help with the process. For example, BitPay is a service that can automatically do the conversion into traditional bank funds.
- Campaigns could be required to establish separate campaign crypto wallets that could only be used for cryptocurrency contributions.
- Cryptocurrency contributions could be treated as in-kind contributions in how they are reported and regulated.
- Governments could require campaigns to request a copy of a passport or driver’s license when receiving cryptocurrency, just like requests campaigns already make from Americans or green card holders who donate while living abroad.
There’s one thing that must be accounted for no matter the solution, though: storing campaign contributions in your cryptocurrency wallet means that the value of your digital currency could change, which would require adjustment disclosures (i.e., reporting gains in value as further contributions or losses as expenditures). Digital currency would also need to be converted to fiat (such as U.S. dollars) to be used as an expenditure.
What People Get Wrong About Crypto
- Cryptocurrency is neither anonymous nor unregulated:
- Most cryptocurrency is bought and sold through exchanges that must follow strict Know Your Customer and Anti-Money Laundering regulations enforced by the U.S. Treasury Department.
- Cryptocurrency is not untraceable:
- Because the crypto exchanges are highly regulated, law enforcement can reach out to the exchanges and confirm the source of funds from an exchange and track the flow of money more quickly than with cash or bank transfers because all cryptocurrency transactions are made on a public blockchain.
4 States That Allow Cryptocurrency Donations to Campaigns
Politicians in Iowa are allowed to accept crypto donations to campaigns. The contributions are reported as in-kind donations, meaning candidates must report the cash value of each donation and the donor’s name. When/if the digital currency is sold, campaigns must report when it was sold and who bought it.
Additionally, Iowa’s campaign finance laws state that cryptocurrency donations must be converted to U.S. dollars before being used as expenditures. That makes sense since, by state law, campaign expenditures must be paid with funds from Iowa financial institutions.
Cryptocurrency regulation in Colorado takes a different approach than Iowa’s. In Colorado, political candidates must report crypto contributions as cash donations, which makes crypto donations subject to cash contribution limits. In Colorado, such limits mean that cryptocurrency contributions are capped at $100 per election.
The value of the crypto at the time of the contribution is recorded in the disclosure forms. Increases or decreases in values are reported as credits and debits in future disclosures.
Florida allows cryptocurrency contributions and follows FEC guidance for cryptocurrency regulation by treating digital coins as in-kind donations.
Nikki Fried, a 2022 Democratic gubernatorial candidate, is pioneering the adoption of this fundraising tactic among Florida politicians. She views crypto contributions as an opportunity for grassroots and disenfranchised constituents to more readily “get involved” in political campaigns.
Despite New York being known as a state that’s tough on crypto regulations, cryptocurrency contributions are legal for political campaigns in New York. In fact, New York City mayor Eric Adams has already successfully incorporated crypto donations into his campaign funding and has promised to encourage more crypto-friendly changes.
4 States that Don’t Allow Crypto Contributions
Political campaigns in California cannot accept digital currency as a contribution. The state’s Fair Political Practices Commission simply states, “No contribution may be made or received in cryptocurrency.”
As of 11/28/2018, the Michigan Campaign Act prohibits the use of cryptocurrency in political campaigns within the state. The reason for the law is that the value of cryptocurrencies is too volatile to accurately report crypto donations in campaign finance disclosures.
Cryptocurrencies in political fundraising are prohibited within the context of North Carolina’s current campaign finance laws. Current laws are written to regulate campaign contributions in terms of U.S. dollars, and the state board worries that there isn’t a proper framework in place to regulate cryptocurrency contributions.
Oregon recently prohibited cryptocurrency as a form of political contribution. The law defines cryptocurrency as, “digital or virtual currency that relies on cryptography to effect transfers and a decentralized network to record transactions,” which might provide some insight into why lawmakers chose to restrict crypto donations.
4 States That Are Still Deciding on Cryptocurrency Regulation
There are 37 states that have bills up for vote in 2022 regarding the use and regulation of cryptocurrency. In these states, the proposed laws cover a range of topics regarding cryptocurrency issues, but the following four states have bills that specifically address the use of cryptocurrency donations in political campaigns.
In the 2021–2022 legislative session, there’s a pending bill that would amend the Code of Laws of South Carolina to allow digital currency as a form of political contribution. This bill also states that increases in value of the currency after its receipt should be reported as interest. Candidates would be required to convert the cryptocurrency into U.S. dollars and deposit the sum into campaign committee accounts before spending the contribution.
The Louisiana state legislature has a pending bill that explicitly allows cryptocurrency to be a form of campaign contribution within the state. As with many other states, Louisiana’s proposed bill would adopt cryptocurrency regulations such as requiring digital currency be converted into fiat currency before being used as expenditures. Crypto contributions would also be classified as in-kind contributions if this law passes.
Texas has a pending bill that would allow cryptocurrency donations to be counted as in-kind contributions. Crypto funds could not be used for expenditures without first converting them to U.S. dollars and depositing them in a campaign committee bank account. The market value of the cryptocurrency would be recorded in finance disclosures, but increases in value would not need to be reported unless they surpass contribution limits for the state of Texas.
Wisconsin technically allows cryptocurrency as a form of political contribution, and some candidates have accepted crypto funds in their campaigns since 2018. However, the issue is hardly decided upon in any legislative sense. There has been pending legislation on the matter of cryptocurrency in campaign fundraising since 2018.
So far, however, no framework for allowing and regulating cryptocurrency in political campaigns has been agreed upon. Wisconsin lawmakers cite concerns over regulation difficulties when expressing hesitation to openly embrace digital currency.
Keep Your Ear to the Ground
While the lists above aren’t an exhaustive collection of cryptocurrency laws in every state, you (hopefully) now have a solid idea of the varying opinions about crypto donations and the state of current cryptocurrency legislation. No doubt a lot will change over the coming years as more states weigh in on their own policies, so if your state doesn’t currently allow crypto to be used for political donations, that could change in the future.
In other words, stay tuned! Cryptocurrency regulation is still taking shape across the United States.